Saturday

23rd Mar 2019

Opinion

Are art 'freeports' tip of EU tax avoidance iceberg?

  • There are concerns that paintings and masterpieces could be stashed in freeports as a means of laundering money (Photo: Matt Tempest)

If the EU is serious about tackling tax havens, it needs to clean its own house first.

Battling the tax havens and legislative loopholes which plague the bloc would be a potent weapon against the continent's surging populists, who frequently invoke tacit agreements between political elites and fat cats to avoid taxation.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Tax avoidance costs EU countries hundreds of billions of euros—some estimates suggest as much as $1 trillion [€0.88 trn]; Europe loses as much as 20 percent of the corporate taxes to which it is entitled.

Widespread tax evasion also allows corrupt politicians and criminals to launder money and protect ill-gotten gains, but the continent's tax havens also undermine fair competition between EU states and encourage tax malpractice.

Dutch historian Rutger Bergman shed some light on the problem at the recent Davos World Economic Forum: "I hear people talking the language of participation, justice, equality and transparency, but almost no one raises the real issue of tax avoidance, right? And of the rich just not paying their fair share."

Secretive 'tax limbo' freeports

The EU will be unable to lead the global fight against tax evasion, however, while there are still tax havens on EU soil, notably on some British islands and in Luxembourg.

Recently, members of the European Parliament raised concerns about the risks presented by Le Freeport, a 22,000 square meter high-security facility located near Luxembourg airport, where goods can be stored with confidentiality—and without being taxed.

German MEP Wolf Klinz of the parliament's special committee on financial crimes, tax evasion and tax avoidance in early January sent the European commission president Jean-Claude Juncker an official request to take action against legal loopholes used for tax evasion and money laundering at Luxembourg's Le Freeport.

Last February, committee members and MEPs Ana Gomes and Evelyn Regner visited Le Freeport and called it a "black hole" with "a real lack of transparency".

The MEPs aren't the first to point out problems with the Freeport.

In 2014, journalist James Moore highlighted the potential of this facility to serve as a kind of tax haven.

He noted how "the Luxembourg facility opened in the same week that the OECD unveiled proposals to tackle multinational corporate tax avoidance. Critics argue that the growth [of] freeports represent a new battleground in the fight against tax avoidance by individuals."

Perhaps most notably, there are concerns that paintings and masterpieces could be stashed in freeports as a means of laundering money.

According to a recent report in the Art Newspaper, "the rise of art as an asset class has contributed to a sharp increase in freeports – from less than 100 in 1975 to around 3,000 in 135 countries in 2008".

A number of the world's biggest freeports, including Le Freeport Luxembourg, facilities in Geneva and Singapore are linked to Yves Bouvier, a Swiss art dealer who has been investigated in a number of jurisdictions for complicity in money-laundering and tax-evasion.

As a report by the European Parliamentary Research Service pointed out: "This concentration of a worldwide network of connected freeports and different roles could imply a risk of conflicting interests and insider trading. The fact that Mr Bouvier is entangled in an affair involving alleged fraud and insider trading may justify such considerations."

Freeports not only bolthole for tax avoidance

It remains to be seen whether or not the EU cracks down on freeports following MEPs' concerns.

But even if the freeports disappeared, the tax problem would endure.

For example, the ultra-wealthy are increasingly taking advantage of a lack of harmonisation between jurisdictions to store works of art on their yachts–and possibly avoid tax–a serious concern which the EU and G7 must address.

The British conservator Pandora Mather-Lees has described a yacht containing more than 800 pieces of art that were worth more than double the vessel itself: "There are superyachts with better collections than some national museums," she says.

The storage of priceless works of art in freeports and aboard luxury yachts has not only raised concerns over their physical safety, but also fundamental questions about what art is for.

"Works of art are created to be viewed," says Louvre director Jean-Luc Martinez who describes freeports as the greatest museums no one can see.

Some see even higher stakes for contemporary works, as they can be whisked off before ever entering the public consciousness.

Storage puts the art "intellectually almost in a coma," says Joanne Heyler, the director of the Broad Museum.

Yachts could also be employed as a means to smuggle away masterpieces that are part of a country's national heritage, while it has been reported that art auctions sometimes take place on the vessels.

Still, tax avoidance and other criminal behaviour are the most pressing concerns.

"The extent to which yachts and art collections are used to get out of paying taxes is unknown, largely because of the complexities of international tax law and the intricate mechanisms the superrich use to shield their wealth from tax authorities," the journalist Gaby Del Valle recently wrote in Vox.

The very existence of tax havens within the EU is deeply concerning.

While the European parliament has issued strong and comprehensive recommendations to tackle tax avoidance, the European commission must also address the issue, stamping out tax evasion and money-laundering practices before they occur.

If progress is to be made at a global level on this front, the EU must fix its own problems first.

Nicolas Tenzer is the chairman of the Paris-based Centre for Study and Research for Political Decision (Cerap), editor of the journal Le Banquet, author of three official reports to the government, including two on international strategy, and of 21 books

Why majority voting on EU taxation is a bad idea

Harmonising tax rates would probably not mean harmonising all tax systems to low rates – such as those in Ireland, for instance, but much rather an increase of taxes across the continent.

The EU's tax haven blacklist - impressive or impotent?

One year ago, the European Union published its first ever blacklist of tax havens. It is crucial that EU governments help end the era of tax havens to ensure the billions currently hidden from public coffers.

MEPs demand stronger rules against tax evasion

MEPs in the civil liberties and economic committees voted in favour of toughening up EU wide rules on tax evasion, as they gear up for institutional talks in March on the EU's anti-money laundering directive.

Macron is confusing rigidity with strength

Jan Zahradil, EU Commission president Spitzenkandidat for the European Conservatives and Reformists Group, responds to Emmaneul Macron's European vision ahead of the May elections.

A compromise proposal for the Article 50 extension

At this week's summit, EU leaders should extend Article 50 until the May European elections. But they should postpone the effective date of the UK's withdrawal from EU rights, rules, and regulations for another year - to May 2020.

Catalan independence trial is widening Spain's divides

What is really needed is not the theatre of a rebellion trial, but a forensic examination of whether public funds were misused, and a process of dialogue and negotiation on how the Catalan peoples' right to self-determination can be satisfied.

News in Brief

  1. EU leaders at summit demand more effort on disinformation
  2. Report: Corbyn to meet May on Monday for Brexit talks
  3. Petition against Brexit attracts 2.4m signatures
  4. Study: Brexit to cost EU citizens up to €40bn annually
  5. NGOs demand France halt Saudi arm sales
  6. Report: Germany against EU net-zero emissions target
  7. Former top EU official takes job at law firm
  8. Draft text of EU summit has Brexit extension until 22 May

Italy should capitalise on Brexit

Now that the UK is leaving, Italy can, and should, step up. It is the third largest country and economy in the EU. Spain and Poland follow, but they are significantly smaller economically and population-wise.

The Magnitsky Act - and its name

It is disappointing that so many MEPs in the Socialist and Green group caved in to Russian interests, in fear of challenging a plutocratic regime, by saying 'no' to naming the Magnitsky legislation by its rightful name: Magnitsky.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  2. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  3. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  4. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  5. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  6. Nordic Council of MinistersNordic commitment to driving global gender equality
  7. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  8. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  9. Nordic Council of MinistersNordic talks on parental leave at the UN
  10. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  11. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  12. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID

Latest News

  1. Italy takes China's new Silk Road to the heart of Europe
  2. What EU leaders agreed on climate - and what they mean
  3. Copyright and (another) new Brexit vote This WEEK
  4. EU avoids Brexit crash, sets new date for 12 April
  5. Campaigning commissioners blur the lines
  6. Slovakia puts squeeze on free press ahead of election
  7. EPP suspends Orban's Fidesz party
  8. Macron is confusing rigidity with strength

Stakeholders' Highlights

  1. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  2. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  3. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  4. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  5. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  6. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  7. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  8. Nordic Council of MinistersSeminar on disability and user involvement
  9. Nordic Council of MinistersInternational appetite for Nordic food policies
  10. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  11. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  12. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”

Stakeholders' Highlights

  1. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  2. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  3. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  4. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  5. Nordic Council of MinistersThe Nordic gender effect goes international
  6. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  7. Nordic Council of MinistersNordic design sets the stage at COP24, running a competition for sustainable chairs
  8. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  9. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  10. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  11. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  12. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All

Join EUobserver

Support quality EU news

Join us